What are Interval Funds
A Brief Guide on the Salient Features of Interval Mutual Funds.
- An Interval Fund is a Close-Ended Mutual Fund.
- You cannot trade these funds on the secondary market.
- Interval Funds come with fixed tenures, and you can only redeem them upon maturity.
- While they are not highly liquid, Interval Funds carry relatively lower risks.
- Interval funds are ideal for conservative investors looking for fixed income sources.
There is no doubt that Mutual Funds continue to remain the most prevalent investment instruments in India. Whether you are a conservative, moderate, or aggressive investor, you will find exciting schemes that can help you attain your investment objectives and grow your corpus. Out of the various types of Mutual Funds schemes available in India, an Interval Mutual Fund is a popular investment chosen by conservative investors. Find out more about this mutual fund type in this article.
What are Interval Funds?
Interval Funds are a kind of Close-ended Fund, consisting of shares that do not trade on the secondary market. The fund will periodically offer to repurchase a percentage of outstanding shares at Net Asset Value. With Interval Funds, you can buy or sell units only during a pre-decided time. Like other Close-ended Funds, an Interval Fund does not allow you to buy or sell frequently during the interval period. Another point of similarity is that Interval Funds are also listed on stock exchanges.
How do Interval Mutual Funds Work?
In essence, with Interval Funds, your money is invested for a fixed tenure, and you cannot redeem the fund before maturity. This allows the fund manager to utilise your investments and allocate them towards securities that align with the maturity value of the fund. This investment strategy which is somewhat similar to a Fixed Maturity Plan, can deliver better returns.
Salient Features of Interval Funds
When you invest in an Interval Fund, your money is illiquid till the maturity period is over. You cannot trade the funds on any secondary market or exit the investment, even if you are ready to pay an exit load.
Returns and Security
Interval Funds are not known to provide high returns as compared to most other mutual funds. However, they are deemed safe investments as they chiefly invest in Debt Funds. Historically, Interval Funds in India have provided a 5-year return of 6-8.5%.
The Period over which you stay invested in an instrument is known as your investment horizon. Interval Funds are better suited for short term investments. So, if your investment horizons coincide with the maturity dates of Interval Funds, then they can prove a good option for you.
Interval Mutual Funds are ideal for investors whose main objective is to earn a fixed source of income. Investors looking for a lump sum payout at the end of the investment tenure may also benefit from investing in Interval Funds.
Invest in Mutual Funds at digibank
Now that you are equipped with information about Interval Funds, you can make an informed choice and begin investing in Mutual Funds. With digibank, you can choose from a wide range of mutual fund investments based on your risk profile and investment objectives. Choose from over 200 mutual funds across categories like debt funds, equity funds, index funds and more.
Download digibank to explore the different mutual funds on offer.
*Disclaimer: This article is for information purposes only. We recommend you get in touch with your income tax advisor or CA for expert advice.